•z. 

G-8 


IC-NRLF 


SB    ITS    ^ 


3    ig,8 


War  Finance 
Corporation  Act 


Guaranty  Trust  Company 
of  New  York 


War  Finance  Corporation  Act 


Approved  AprU  5, 1918 


A 


Guaranty  Trust  Company  of  New  York 
140  Broadway 

FIFTH   AVENUE    OFFICE  LONDON    OFFICE 

Fifth    Avenue    and    43rd    Street  32  Lombard  Street,  E.  C. 

MADISON   AVENUE   OFFICE  PARIS      OFFICE 

Avenue  and  60th  Street  Rue  des    Italians,   1  &  3 


COPYRIGHT,   1918 
GUARANTY  TBUST  COMPANY  OF  NEW  YORK 


Contents 

Foreword  3 

Synopsis  of  Act  7 

Text  of  Act  31 

Index  to  Synopsis  51 


373735 


War  Finance  Corporation  Act 

Approved,  April  5,  1918 


FOREWORD 

Purpose  of  the  Measure 

T  1 1HE  War  Finance  Corporation  Act  is  purely 
JL  an  emergency  measure  designed  to  obtain 
credits  and  resources  for  the  operation  of  indus- 
tries necessary  and  contributory  to  the  prosecu- 
tion of  the  war.  To  accomplish  this,  the  law  has 
a  twofold  purpose,  first,  to  provide  facilities 
whereby  war  industries  may  obtain  necessary 
funds  for  operation,  and,  second,  to  restrict  un- 
necessary capital  expenditures  in  other  than  war 
industries.  The  term  "war  industries"  is  not 
limited  to  those  industries  turning  out  the  actual 
munitions  of  war  but,  as  stated  by  the  Secretary 
of  the  Treasury,  includes  "all  those  supplying 
any  of  the  elements  of  production  or  distribution 
in  an  industrial  structure  designed  to  meet  the 
diversified  requirements  of  the  war." 

War  Finance  Corporation 

To  provide  funds  and  credits  in  aid  of  war 
industries,  the  Act  creates  the  War  Finance  Cor- 
poration, the  organization  and  powers  of  which, 
[3] 


as  defined  in  the  law,  will  be  later  explained. 
This  Corporation  is  so  organized  as  to  take  care  of 
loan?,  credits  and  discounts,  by  permitting  loans 
to  banks,  bankers  and  trust  companies,  and  in 
certain  cases  to  industries  direct  for  war  purposes. 

The  Secretary  of  the  Treasury  in  his  report  to 
the  Finance  Committee,  states  the  object  of  the 
War  Finance  Corporation  as  follows : 

"In  Europe  central  banks  are  permitted  to  grant  to 
banks  and  bankers  loans  upon  stocks  and  bonds  upon 
certain  well-defined  terms.  The  Federal  reserve  act 
does  not  provide  for  these,  and  the  War  Finance  Cor- 
poration is  designed  as  a  war  emergency  to  fill  this 
gap.  The  provisions  of  the  Federal  reserve  act  which 
permit  Federal  reserve  banks  to  rediscount  and  purchase 
commercial  paper  and  paper  secured  by  the  Govern- 
ment's obligations  have  had  the  effect  of  forcing  the 
banks  to  discriminate  against  loans  on  ineligible  paper, 
even  where  such  loans  were  vitally  necessary  for  war 
purposes,  in  favor  of  loans  on  commercial  paper,  even 
where  they  represented  activities  or  enterprises  not 
related  to  the  war,  and  which  might  well  be  curtailed 
during  the  period  of  the  war." 

"The  bill  contemplates  that  the  War  Finance  Cor- 
poration shall  lend  money  to  banks,  both  National  and 
State,  which  are  making  loans  to  enterprises  conducted 
by  persons,  firms,  or  corporations  producing  materials 
or  supplies,  or  doing  anything  else  which  is  necessary 
for  or  contributory  to  the  war.  If  a  bank,  for  in- 
stance, should  loan  money,  we  will  say,  to  a  munitions 
company,  and  take  the  company's  six  months'  note  with 
the  company's  bond  as  collateral  security,  that  note 
would  not  be  eligible  for  rediscount  in  the  Federal  re- 
serve banks;  but  the  War  Finance  Corporation  hi  such 
[4] 


circumstances  could  advance  to  the  bank  against  the 
note  of  the  munitions  company,  so  secured  with  that 
bank's  indorsement  on  it,  75  per  cent,  of  the  face  of 
that  note." 

Capital  Issues  Committee 

For  the  success  of  the  war,  it  is  important  that 
funds  should  not  be  directed  to  channels  not 
aiding  in  its  prosecution.  Such  diversion  of 
capital  not  only  lessens  the  financial  resources 
of  our  war  industries  but  creates  a  demand  for 
labor  and  materials  which  would  otherwise  be 
directed  to  operations  contributory  to  the  war. 

Industries  which  are  now  necessary  or  con- 
tributory to  the  conduct  of  the  war,  should  be 
first  provided  for  out  of  funds  available  for 
investment.  Capital,  which  in  normal  times  is 
freely  permitted  to  seek  its  own  investment, 
should  during  the  war  be  so  directed  that  the 
financial  requirements  of  the  Government  and 
of  our  war  industries  may  be  taken  care  of  before 
available  capital  is  invested  either  in  new  enter- 
prises, or  for  the  expansion  of  old  enterprises 
which  are  not  directly  or  indirectly  essential  to  the 
prosecution  of  the  war. 

By  the  establishment  of  the  Capital  Issues 
Committee,  with  authority  to  pass  on  issues  of 
securities,  unnecessary  expenditures  of  capital 
may  be  kept  within  bounds  during  the  period 
of  the  war. 

(5] 


Synopsis  of  the 

War  Finance  Corporation  Act 

War  Finance  Corporation 

Organization 

The  Act  creates  a  corporation  known  as  the 
"War  Finance  Corporation,"  composed  of  the 
Secretary  of  the  Treasury  and  four  additional 
persons  who  shall  act  as  directors.  The  life  of 
the  Corporation  is  limited  to  ten  years,  but  it  is 
prohibited  from  exercising  any  of  its  powers  after 
six  months  after  the  termination  of  the  war, 
except  those  incident  to  the  liquidation  of  its 
assets  and  the  winding  up  of  its  affairs.  (Sec.  1.) 
Until  authorized  by  the  President  to  commence 
business,  the  Corporation  shall  not  exercise  any 
of  its  powers  nor  perform  any  acts,  except  such 
as  are  incidental  and  preliminary  to  its  organi- 
zation. (Sec.  14.) 

Offices 

The  principal  office  of  the  Corporation  shall  be 
located  in  the  District  of  Columbia,  but  branch 
offices  may  be  established  in  any  cities  of  the 
United  States  under  regulations  prescribed  by 
the  board  of  directors.  (Sec.  5.) 
[7] 


Board  of  Directors 

The  directors  are  appointed  by  the  President, 
with  the  advice  and  consent  of  the  Senate,  to 
manage  the  affairs  of  the  Corporation,  but  any 
director,  as  well  as  any  officer  or  employee,  is 
prohibited  from  participating  in  any  way  in  the 
determination  of  any  question  affecting  his  per- 
sonal interests  or  those  of  any  corporation,  part- 
nership or  association,  in  which  he  is  directly  or 
indirectly  interested.  The  Secretary  of  the  Treas- 
ury shall  act  as  chairman  of  the  board. 

All  directors  and  officers  must  take  an  oath 
for  the  faithful  discharge  of  their  duties,  and 
directors  must  devote  their  time,  not  otherwise 
required  by  the  business  of  the  United  States,  prin- 
cipally to  the  business  of  the  Corporation. 

The  President  shall  designate  two  directors  to 
serve  for  two  years  and  two  for  four  years,  but 
each  director  appointed  thereafter  will  hold 
office  for  a  term  of  four  years.  Directors  are 
subject  to  removal  by  the  President.  Officers 
and  employees  of  the  United  States  and  directors 
of  Federal  reserve  banks  are  eligible  for  appoint- 
ment as  directors  of  the  Corporation.  When  a 
vacancy  occurs  in  the  board  of  directors,  the 
person  appointed  to  fill  the  vacancy  shall  serve 
for  the  unexpired  term.  Three  members  of  the 
board  shall  constitute  a  quorum.  (Sec.  3.) 

The  salaries  of  directors  are  fixed  at  $12,000 
[8] 


per  annum.  If  a  director  receives  compensation 
from  the  United  States  for  services,  he  may  not 
receive  as  salary  from  the  Corporation  any 
amount  which  would  make  the  total  paid  him  by 
the  United  States  and  the  Corporation  exceed 
$12,000.  (Sec.  4.) 

Capital  Stock 

The  capital  stock  of  the  Corporation  is  fixed 
at  $500,000,000,  all  to  be  subscribed  by  the  United 
States,  which  subscription,  upon  approval  of  the 
Secretary  of  the  Treasury,  shall  be  subject  to  call 
upon  the  vote  of  three-fifths  of  the  board  of  direc- 
tors, at  such  time  as  may  be  deemed  advisable. 
The  sum  of  $500,000,000,  or  so  much  of  that 
amount  as  may  be  necessary,  is  appropriated  for 
making  payment  upon  the  subscription.  Re- 
ceipts for  payments  by  the  United  States  for  or 
on  account  of  such  stock  shall  be  issued  by  the 
Corporation  to  the  Secretary  of  the  Treasury,  and 
shall  be  evidence  of  stock  ownership.  (Sec.  2.) 

Powers 
Administrative  Powers 

The  Corporation  has  the  following  administrative 
powers:  to  adopt,  alter  and  use  a  corporate  seal; 
to  make  contracts;  to  purchase,  lease,  hold  and 
dispose  of  real  estate  necessary  for  the  prosecution 
of  its  business;  to  sue  and  be  sued  in  any  Federal 
or  state  court;  to  appoint  by  its  board  of  directors 
[9] 


and  fix  the  compensation  of  necessary  officers, 
attorneys,  employees;  to  define  their  duties,  re- 
quire bonds  and  fix  the  penalties  of  such  bonds 
and  to  dismiss  at  pleasure  such  officers,  attorneys 
and  employees;  and  to  prescribe,  amend  and  re- 
peal by  its  board  of  directors,  subject  to  the  ap- 
proval of  the  Secretary  of  the  Treasury,  by-laws 
regulating  the  manner  in  which  its  general  busi- 
ness may  be  conducted  and  the  privileges,  granted 
it  by  law,  may  be  exercised  and  enjoyed,  and 
prescribing  the  powers  and  duties  of  its  officers 
and  agents.  (Sec.  6.) 

Power  to  Deal  in  United  States  Bonds 

The  Corporation  may  subscribe  for,  acquire  and 
own,  buy,  sell  and  deal  in  bonds  and  obligations 
of  the  United  States,  issued  or  converted  after 
September  24,  1917,  to  such  extent  as  the  board 
of  directors,  with  the  approval  of  the  Secretary 
of  the  Treasury,  may  determine.  (Sec.  11.) 

Advances  to  Banking  Institutions 

The  Corporation  is  authorized  to  make  advances 
for  periods  not  exceeding  five  years  as  follows: 

(1)  to  any  bank,  banker  or  trust  company  in 
the  United  States,  which  shall  have  made,  after 
April  6,  1917,  and  which  shall  have  outstanding, 
any  loans  evidenced  by  notes,  to  any  person, 
firm,  corporation  or  association  conducting  an 
[10] 


established  and  going  business  in  the  United 
States,  whose  operations  are  necessary  or  con- 
tributory to  the  prosecution  of  the  war.  No  such 
advance  shall  exceed  seventy-five  per  centum  of 
the  face  value  of  such  loan  or  loans,  and 

(2)  to  any  bank,  banker  or  trust  company  in  the 
United  States,  which  shall  have  rendered  financial 
assistance  to  any  such  person,  firm,  corporation 
or  association,  by  the  purchase  after  April  6,  1917, 
of  its  bonds  or  other  obligations.  No  such 
advance  shall  exceed  seventy-five  per  centum  of 
the  value  of  such  bonds  or  other  obligations  at  the 
time  of  the  advance  as  estimated  and  determined 
by  the  board  of  directors  of  the  Corporation. 

All  advances  shall  be  made  upon  the  promissory 
note  of  the  bank,  banker,  or  trust  company, 
secured  by  the  notes,  bonds  or  other  obligations, 
which  are  the  basis  of  such  advances  by  the 
Corporation,  together  with  all  the  securities 
which  such  bank,  banker,  or  trust  company  may 
hold  as  collateral  for  such  notes,  bonds,  or  other 
obligations. 

The  Corporation,  however,  shall  have  power 
to  make  advances  (a)  up  to  one  hundred  per  cen- 
tum of  the  face  value  of  any  loan  made  by  any 
such  bank,  banker,  or  trust  company  to  any  per- 
son, firm,  corporation  or  association,  and  (b) 
up  to  one  hundred  per  centum  of  the  value,  at  the 
time  of  such  advance,  of  such  bonds  or  other 
obligations  by  the  purchase  of  which  financial 

[in 


assistance  has  been  rendered  to  suqh  person, 
firm,  corporation  or  association.  Every  such 
advance  shall  be  secured  as  described  in  the  fore- 
going paragraph  and,  in  addition,  by  collateral 
security,  of  such  character  as  shall  be  prescribed 
by  the  board  of  directors  of  the  Corporation  and 
of  a  value,  at  the  time  of  such  advance  (as  esti- 
mated and  determined  by  the  board  of  directors 
of  the  Corporation),  equal  to  at  least  thirty-three 
per  centum  of  the  amount  advanced  by  the  Cor- 
poration. The  Corporation  is  authorized  to 
require  additional  security  at  any  time.  (Sec.  7.) 

Advances  to  Savings  Institutions 
The  Corporation  is  empowered  to  make  advances, 
for  periods  not  exceeding  one  year,  to  any  savings 
or  other  banks,  or  trust  companies,  in  the  United 
States,  receiving  savings  deposits  or  to  any  build- 
ing and  loan  association  in  the  United  States,  on 
the  promissory  notes  of  the  borrowing  institution, 
whenever  the  Corporation  deems  such  advances 
necessary  or  contributory  to  the  prosecution  of 
the  war,  or  important  in  the  public  interest. 
Such  notes  shall  be  secured  by  the  pledge  of  se- 
curities, prescribed  by  the  board  of  directors  of 
the  Corporation,  the  value  of  which  at  the  time 
of  such  advance,  ascertained  by  the  board  of 
directors  of  the  Corporation,  shall  equal  at  least 
one  hundred  and  thirty-three  per  centum  of  the 
amount  advanced. 

[12] 


The  rate  of  interest  charged  on  any  such  ad- 
vance shall  not  be  less  than  one  per  centum  per 
annum  in  excess  of  the  rate  of  discount  for  ninety- 
day  commercial  paper,  prevailing  at  the  time  of 
the  advance  at  the  Federal  reserve  bank  of  the 
district  in  which  the  borrowing  institution  is 
located.  Such  rate  in  no  case  shall  exceed  the 
average  rate  receivable  by  the  borrowing  insti- 
tution on  its  loans  and  investments  made  during 
the  six  months  prior  to  the  date  of  the  advance, 
except  that  where  the  average  rate  receivable  by 
the  borrowing  institution  is  less  than  the  rate 
of  discount  for  ninety-day  commercial  paper,  the 
rate  of  interest  on  such  advance  shall  be  equal 
to  the  rate  of  discount.  Additional  collateral 
may  be  required  by  the  Corporation  in  its  dis- 
cretion. (Sec.  8.) 

Direct  Advances  to  War  Industries 

In  exceptional  cases,  the  Corporation  is  empowered 
to  make  advances  directly  to  any  person,  firm, 
corporation  or  association  conducting  an  estab- 
lished and  going  business,  whose  operations  are 
necessary  or  contributory  to  the  prosecution  of 
the  war.  Such  advances  shall  be  made  only  for 
the  purpose  of  conducting  such  business  in  the 
United  States  and  only  when  the  board  of  direc- 
tors of  the  Corporation  is  of  the  opinion  that 
such  person,  firm,  corporation  or  association  is 
[13] 


unable  to  obtain  funds  upon  reasonable  terms 
through  banking  channels  or  from  the  general 
public.  Advances  may  be  made  for  a  period  not 
exceeding  five  years,  subject  to  terms  and  regu- 
lations prescribed  by  the  board  of  directors  of  the 
Corporation. 

In  no  case  shall  the  aggregate  amount  of  such 
direct  advances  exceed,  at  any  one  time,  an 
amount  equal  to  twelve  and  one-half  per  centum 
of  the  sum  of  (1)  the  authorized  capital  stock 
of  the  Corporation,  plus  (2)  the  aggregate  amount 
of  bonds  of  the  Corporation  authorized  to  be 
outstanding  at  any  one  time  when  the  capital 
stock  is  fully  paid  in.  Such  advances  must  be 
secured  by  adequate  security  prescribed  by  the 
board  of  directors  of  a  value  at  the  time  of  such 
advance,  as  estimated  by  the  board,  equal  to 
(except  in  case  of  an  advance  made  to  a  railroad 
in  the  possession  and  control  of  the  President, 
for  the  purpose  of  making  additions,  betterments 
or  road  extensions  to  such  railroad)  at  least  one 
hundred  and  twenty-five  per  centum  of  the 
amount  advanced  by  the  Corporation.  The  Cor- 
poration shall  have  power  to  require  additional 
security  at  any  time. 

The  rate  of  interest  charged  on  any  such  ad- 
vance shall  not  be  less  than  one  per  centum  per 
annum  in  excess  of  the  rate  of  discount  for  ninety- 
day  commercial  paper  prevailing  at  the  time  of 
[14] 


such  advance  at  the  Federal  reserve  bank  of  the 
district  in  which  the  borrower  is  located.  (Sec.  9.) 

Limitation  on  Advances 

In  no  case  shall  the  aggregate  amount  of  the 
advances  made  to  any  one  person,  firm,  corpora- 
tion or  association  exceed  at  any  one  time  an 
amount  equal  to  ten  per  centum  of  the  authorized 
capital  stock  of  the  Corporation.  This  provision 
does  not  apply  in  the  case  of  an  advance  to  a 
railroad  in  the  possession  and  control  of  the 
President,  for  the  purpose  of  making  additions, 
betterments  or  road  extensions  to  such  railroad. 
(Sec.  10.) 

Power  to  Issue  Bonds 

The  Corporation  is  authorized  to  issue  and  have 
outstanding  at  any  one  time  its  bonds  in  an 
amount  aggregating  not  more  than  six  times  its 
paid-in  capital,  such  bonds  to  mature  not  less 
than  one  year  nor  more  than  five  years  from  the 
respective  dates  of  issue.  Bonds  shall  bear  inter- 
est at  such  rate  or  rates  as  may  be  determined  by 
the  board  of  directors  and  may  be  redeemable 
before  maturity  at  the  option  of  the  Corporation. 
Such  rates  shall  be  subject  to  the  approval  of 
the  Secretary  of  the  Treasury.  These  bonds  shall 
have  a  first  and  paramount  floating  charge  on 
all  the  assets  of  the  Corporation  which  shall  not 
at  any  time  mortgage  or  pledge  any  of  its  assets. 
[15] 


They  may  be  issued  at  not  less  than  par  in  pay- 
ment of  any  advances  authorized,  or  may  be 
offered  for  public  sale  or  to  any  individual,  firm, 
corporation  or  association,  at  such  prices  as  the 
board  of  directors,  with  the  approval  of  the 
Secretary  of  the  Treasury,  may  determine. 
(Sec.  12.) 

Upon  terms  prescribed  by  the  board  of  directors, 
with  the  approval  of  the  Secretary  of  the  Treasury, 
at  or  before  issue,  any  of  such  bonds  may  be 
issued  payable  in  foreign  money,  or  at  the  option 
of  the  respective  holders,  either  in  dollars  or  in 
foreign  money,  at  such  fixed  rate  of  exchange  as 
may  be  stated  in  the  bonds.  To  determine  the 
amount  of  bonds  issued  payable  in  foreign  money, 
the  dollar  equivalent  shall  be  determined  by  the 
par  of  exchange  at  the  date  of  issue  as  estimated 
by  the  Director  of  the  Mint,  and  proclaimed  by 
the  Secretary  of  the  Treasury  in  pursuance  of  the 
provisions  of  section  twenty-five  of  the  Act  en- 
titled "An  Act  to  reduce  taxation,  to  provide 
revenue  for  the  Government,  and  for  other  pur- 
poses," approved  August  27,  1894.  (Sec.  12.) 

Liability  of  United  States 

The  United  States  shall  not  be  liable  for  the 
payment   of   the   bonds   or   obligations   of    the 
Corporation,  or  the  interest  thereon,  nor  for  any 
act  or  omission  of  the  Corporation.     (Sec.  17.) 
[16] 


Discount  by  Federal  Reserve  Banks 

Federal  reserve  banks  are  authorized,  subject 
to  the  maturity  limitations  of  the  Federal  Reserve 
Act  and  to  regulations  of  the  Federal  Reserve 
Board,  to  discount  the  direct  obligations  of  mem- 
ber banks  secured  by  bonds  of  the  Corporation 
and  to  rediscount  eligible  paper  secured  by  such 
bonds  and  indorsed  by  a  member  bank.  No 
discount  or  rediscount  under  this  section  shall 
be  granted  at  a  less  interest  charge  than  one  per 
centum  per  annum  above  the  prevailing  rates 
for  eligible  commercial  paper  of  corresponding 
maturity.  (Sec.  13.) 


Security  for  Federal  Reserve  Notes 

With  the  approval  of  the  Federal  Reserve  Board, 
a  Federal  reserve  bank  may  use  any  obligations 
or  paper  so  acquired  for  any  purpose  for  which 
it  is  authorized  to  use  obligations  or  paper  secured 
by  bonds  or  notes  of  the  United  States,  not 
bearing  the  circulation  privilege.  Whenever  Fed- 
eral reserve  notes  are  issued  against  the  security 
of  such  obligations  or  paper,  the  Federal  Reserve 
Board  may  make  a  special  interest  charge  on 
such  notes,  which  in  the  discretion  of  the  Federal 
Reserve  Board  need  not  be  applicable  to  other 
Federal  reserve  notes  which  may  from  time  to 
time  be  issued  and  outstanding. 
[171 


All  provisions  of  law,  in  respect  to  the  acquisi- 
tion by  any  Federal  reserve  bank  of  obligations 
or  paper  secured  by  bonds  or  notes  of  the  United 
States  and  in  respect  to  Federal  reserve  notes 
issued  against  the  security  of  such  obligations  or 
paper,  not  inconsistent  with  this  Act,  shall  extend, 
in  so  far  as  applicable,  to  the  acquisition  of  obli- 
gations or  paper  secured  by  the  bonds  of  the 
Corporation  and  to  the  Federal  reserve  notes 
issued  against  the  security  of  such  obligations  or 
paper.  (Sec.  13.) 

Disposition  of  Funds 

All  net  earnings  of  the  Corporation,  not  required 
for  its  operation,  shall  be  accumulated  as  a  reserve 
fund  until  the  Corporation  is  liquidated.  Such 
funds  shall,  upon  direction  of  the  board  of  direc- 
tors, with  the  approval  of  the  Secretary  of  the 
Treasury,  be  invested  in  bonds  and  obligations 
of  the  United  States  issued  or  converted  after 
September  24,  1917,  or  upon  like  direction  and 
approval,  may  be  deposited  in  member  banks 
of  the  Federal  Reserve  System,  or  in  any  of  the 
Federal  reserve  banks,  or  may  be  used  in  the 
purchase  and  redemption  of  any  bonds  issued 
by  the  Corporation.  Federal  reserve  banks 
are  authorized  to  act  as  depositaries  for  and  as 
the  fiscal  agents  of  the  Corporation  in  the  general 
performance  of  the  powers  conferred.  (Sec.  15.) 
[18] 


Taxation 

All  bonds  issued  by  the  Corporation  shall  be 
exempt,  both  as  to  principal  and  interest,  from 
all  taxation  imposed  by  the  United  States,  its 
possessions  or  any  state,  or  by  any  local  taxing 
authority,  except  (a)  estate  or  inheritance  taxes, 
(b)  graduated  additional  income  taxes,  known 
as  surtaxes,  and  excess  profits  and  war  profits 
taxes,  now  or  hereafter  imposed  by  the  United 
States  upon  the  income  or  profits  of  individuals, 
partnerships,  corporations  or  associations.  The 
interest  on  an  amount  of  such  bonds,  the  principal 
of  which  does  not  exceed  in  the  aggregate  $5,000, 
owned  by  an  individual,  partnership,  corporation 
or  association,  shall  be  exempt  from  income  and 
excess  profits  and  war  profits  taxes. 

The  Corporation,  its  franchises,  capital  and 
reserve  or  surplus,  together  with  income  derived 
therefrom,  shall  be  exempt  from  all  taxation 
imposed  by  the  United  States,  any  state  or  any 
possession  of  the  United  States  or  by  any  local 
taxing  authority,  except  that  any  real  property 
of  the  Corporation  shall  be  subject  to  state, 
county  or  municipal  taxes  to  the  same  extent, 
according  to  its  value,  as  other  real  property. 
(Sec.  16.) 

Dissolution  of  Corporation 

Beginning  six  months  after  the  termination  of 
the  war,  the  date  being  fixed  by  proclamation 

'lit] 


of  the  President,  the  directors  of  the  Corporation 
shall  proceed  to  liquidate  its  assets  and  wind 
up  its  affairs,  but  they  may  from  time  to  time, 
prior  to  such  date,  sell  and  dispose  of  any  securi- 
ties or  other  property  acquired  by  the  Corporation. 
Any  balance  remaining  after  the  payment  of  the 
debts  of  the  Corporation  shall  be  paid  into  the 
Treasury  of  the  United  States  as  miscellaneous 
receipts  and  thereupon  the  Corporation  shall  be 
dissolved.  (Sec.  15.) 

Penalties 
False  Statement 

For  obtaining  any  advance  by  means  of  any 
statement,  known  to  be  false,  the  penalty  is  a 
fine  of  not  more  than  $10,000,  or  imprisonment 
for  not  more  than  five  years,  or  both. 

Overvaluation 

For  obtaining  any  advance  through  wilfull  over- 
valuation of  any  security,  the  penalty  is  a  fine 
of  not  more  than  $5,000,  or  imprisonment  for  not 
more  than  two  years,  or  both. 

Forgery  and  Counterfeiting 

For  forging,  altering  or  counterfeiting  any  bond, 
coupon  or  paper  issued  by  the  Corporation  or 
for  passing  or  attempting  to  pass  the  same,  know- 
ing it  to  be  forged,  altered  or  counterfeited,  the 
[80] 


penalty  is  a  fine  of  not  more  than  $10,000,  or 
imprisonment  for  not  more  than  five  years,  or 
both. 

Embezzlement 

The  penalty  for  the  embezzlement  of  funds  of 
the  Corporation,  or  the  making  of  any  false  entry 
in  the  books  of  the  Corporation,  or  the  drawing" 
or  assigning  of  any  note,  bond,  mortgage  or  draft 
of  the  Corporation,  with  intent  to  defraud,  is  a 
fine  of  not  more  than  $10,000,  or  imprisonment 
for  not  more  than  five  years,  or  both.  (Sec.  18.) 

Detection  of  Violations 

The  Secretary  of  the  Treasury  is  authorized 
to  direct  and  use  the  Secret  Service  Division  of 
the  Treasury  Department  to  detect,  arrest  and 
deliver  into  the  custody  of  the  United  States 
marshal,  having  jurisdiction,  any  person  com- 
mitting any  of  the  foregoing  offenses.  (Sec.  18.) 

Reports  of  the  Corporation 

The  Corporation  shall  file  quarterly  reports 
with  the  Secretary  of  the  Senate  and  with  the 
Clerk  of  the  House  of  Representatives  stating, 
as  of  the  first  day  of  each  month  of  the  quarter 
just  ended, 

(1)  the  total  amount  of  capital  paid  in, 

(2)  the  total  amount  of  bonds  issued, 

(3)  the  total  amount  of  bonds  outstanding, 

[21] 


(4)  the  total  amount  of  advances  made, 

(5)  a  list  of  the  classes  and  amount  of  securities 
taken, 

(6)  the  total  amount  of  advances  outstanding, 
and 

(7)  such  other  information  as  may  be  here- 
after required  by  either  House  of  Congress. 

The  Corporation  shall  also  make  a  report 
to  Congress  on  the  first  day  of  each  regular 
session,  including  a  detailed  statement  of  receipts 
and  expenditures.  (Sec.  19.) 

Indebtedness  of  National  Banks 

The  restriction  imposed  by  Section  5202,  Revised 
Statutes  of  the  United  States,  providing  that, 
except  in  certain  specified  instances,  a  national 
bank  shall  at  no  time  be  indebted  or  in  any  way 
liable  to  an  amount  exceeding  the  amount  of  its 
capital  stock,  at  such  tune  actually  paid  in  and 
remaining  undiminished  by  losses  or  otherwise, 
is  limited  to  exclude  liabilities  incurred  under 
the  provisions  of  the  War  Finance  Corporation 
Act.  (Sec.  20.) 


[22] 


Capital  Issues  Committee 

Membership  and  Organization 

A  Committee  is  created  known  as  the  "Capital 
Issues  Committee,"  composed  of  seven  members 
appointed  by  the  President  by  and  with  the 
advice  and  consent  of  the  Senate,  at  least  three 
of  whom  must  be  members  of  the  Federal  Reserve 
Board.  Officers  and  employees  of  the  United 
States  and  directors  of  Federal  reserve  banks  are 
eligible  for  appointment  on  the  Committee.  Four 
members  shall  constitute  a  quorum  for  the  trans- 
action of  business.  The  President  shall  designate 
one  member  as  chairman  but  any  subsequent 
vacancy  in  the  chairmanship  shall  be  filled  by 
the  Committee.  Members  of  the  Committee, 
as  well  as  its  officers,  attorneys,  agents  or  employ- 
ees, are  disqualified  from  all  participation  in  the 
determination  of  any  question  affecting  their 
personal  interests  or  those  of  any  corporation, 
partnership  or  association  in  which  they  are  in 
any  way  interested. 

The  terms  of  office  of  the  several  members 
of  the  Committee  shall  be  determined  by  the 
President  and  the  compensation  of  those  who  are 
not  members  of  the  Federal  Reserve  Board 
shall  be  $7,500  per  annum.  If  a  member  receives 
any  other  compensation  from  an  office  under  the 
United  States,  the  amount  received  shall  be 
deducted  from  his  salary  and  if  such  other  com- 
[83] 


pensation  is  $7,500  or  more,  he  shall  receive  no 
salary  as  a  member  of  the  Committee.  (Sec.  200.) 

Powers  of  Committee 

The  Committee  may,  under  rules  and  regulations 
to  be  prescribed  by  it,  investigate,  pass  upon, 
and  determine  whether  it  is  compatible  with  the 
national  interest  that  there  should  be  sold,  or 
offered  for  sale  or  for  subscription,  any  securities, 
hereafter  issued  by  any  person,  firm,  corporation 
or  association,  the  total  face  value  of  which,  and 
any  other  securities  issued  by  the  same  person, 
firm,  corporation  or  association  since  the  passage 
of  this  Act,  is  in  excess  of  $100,000.  Shares  of 
stock  of  any  corporation  or  association  without 
nominal  or  par  value,  shall,  for  the  purpose  of 
this  section,  be  deemed  to  be  of  the  par  value 
of  $100  each.  Any  securities,  which,  upon  the 
date  of  the  passage  of  this  Act,  are  in  the  posses- 
sion or  control  of  the  corporation,  association  or 
obligor  issuing  the  same,  shall  be  deemed  to  have 
been  issued  after  the  passage  of  this  Act.  (Sec. 
203.) 

No  Approval  of  Validity  of  Issue 

Nothing  done  or  omitted  by  the  Committee 
shall  be  construed  as  carrying  the  approval  of 
the  Committee  or  of  the  United  States  of  the 
legality,  validity,  worth,  or  security  of  any  securi- 
ties. (Sec  203.) 

[24] 


Issues  not  Subject  to  Investigation 

The  Committee  is  not  authorized  to  pass  upon 

(1)  Any  borrowing  by  any  person,  firm,  cor- 
poration or  association  in  the  ordinary  course  of 
business,    as   distinguished   from   borrowing   for 
capital  purposes, 

(2)  The  renewing  or  refunding  of  indebtedness 
existing  at  the  time  of  the  passage  of  this  Act, 

(3)  The  resale  of  any  securities,  the  sale  or 
offering  of  which  the  Committee  has  determined 
to  be  compatible  with  the  national  interest, 

(4)  Any    securities    issued    by    any    railroad 
corporation,  the  property  of  which  may  be  in  the 
possession  and  control  of  the  President,  or 

(5)  Bonds  issued  by  the  War  Finance  Corpo- 
ration.    (Sec.  203.) 

Employees 

The  Committee  may  employ  and  fix  the  compen- 
sation of  any  officers,  attorneys,  agents  and  other 
employees  deemed  necessary  to  conduct  its 
business,  who  shall  be  appointed  without  regard 
to  the  provisions  of  the  Civil  Service  Act  of  the 
United  States  or  any  rules  or  regulations  made 
in  pursuance  thereof.  The  compensation  of 
any  officer,  attorney  or  employee  shall  not  exceed 
that  received  by  persons  performing  services 
of  similar  character  under  the  Federal  Reserve 
Board.  (Sec.  201.) 

[25] 


Expenses 

All  expenses  of  the  Committee,  such  as  for  trans- 
portation incurred  by  members  or  officers,  at- 
torneys or  employees  under  its  orders  in  making 
investigation,  or  upon  official  business  hi  any 
other  places  than  at  their  respective  headquarters, 
shall  be  allowed  and  paid  on  the  presentation 
of  itemized  vouchers  approved  by  the  chairman. 
(Sec.  202.) 

Office  of  Committee 

The  principal  office  shall  be  in  the  District  of 
Columbia,  but  it  may  meet  and  exercise  all  its 
powers  at  any  place.  Any  inquiry,  necessary  to 
the  duties  of  the  Committee,  may  be  prosecuted 
by  one  or  more  of  its  members,  or  by  such  agents 
as  it  may  designate,  in  any  part  of  the  United 
States. 

The  Committee  may  rent  suitable  offices  and 
purchase  such  furniture,  equipment  and  supplies 
as  may  be  necessary,  but  shall  not  expend  more 
than  $10,000  annually  for  offices  in  the  District 
of  Columbia. 

The  sum  of  $200,000  is  appropriated  for  the 
purpose  of  defraying  the  expenses  of  the  estab- 
lishment and  maintenance  of  the  Committee, 
including  the  payment  of  the  salaries  and  rents 
authorized.  (Sec.  204.) 

[26] 


Report  to  Congress 

The  Committee  shall  make  a  report  to  Congress 
on  the  first  day  of  each  regular  session,  including 
a  detailed  statement  of  the  receipts  and  dis- 
bursements and  also  including  the  names  of  all 
the  officers  and  employees  and  the  salaries  of  each. 
(Sec.  205.) 

Termination  of  Duties  of  the  Committee 

These  provisions  shall  continue  in  effect  until, 
but  not  after,  the  expiration  of  six  months  after 
the  termination  of  the  war,  the  date  being  de- 
termined by  a  proclamation  of  the  President. 
The  President  may,  however,  at  any  time  by 
proclamation  declare  that  the  provisions  of  this 
title  are  no  longer  necessary  and  thereupon  it 
shall  cease  to  be  in  effect.  (Sec.  206.) 


Miscellaneous  Provisions 

Penalties 

Except  where  the  penalty  is  otherwise  provided 
for  in  this  Act,  the  wilfull  violation  of  any  of  the 
provisions  hereof,  or  participation  in  such  vio- 
lation, shall  be  punishable  by  a  fine  of  not  more 
than  $10,000,  or  imprisonment  for  not  more  than 
one  year,  or  both.  (Sec.  300.) 
[27] 


Stamp  Tax 

Stamp  taxes  shall  not  be  required  or  imposed 
upon  a  promissory  note  secured  by  pledge  of  bonds 
or  obligations  of  the  United  States,  issued  after 
April  24,  1917,  or  secured  by  the  pledge  of  a 
promissory  note  which  itself  is  secured  by  the 
pledge  of  such  bonds  or  obligations,  but  in  either 
case  the  par  value  of  such  bonds  or  obligations 
shall  at  least  equal  the  amount  of  such  note. 
(Sec.  301.) 

Provisions  Deemed  Separable 

If  any  clause,  sentence,  paragraph  or  part  of 
this  Act  shall  for  any  reason  be  adjudged  by  any 
court  of  competent  jurisdiction  to  be  invalid, 
or  in  case  any  such  court  shall  adjudge  to 
be  invalid  any  of  its  provisions  in  respect  to  any 
class  of  securities,  such  judgment  shall  not 
affect,  impair  or  invalidate  the  remainder  of  this 
Act,  but  shall  be  confined  in  its  operation  to  the 
clause,  sentence,  paragraph,  part,  or  subject 
matter  of  this  Act,  directly  involved  in  the  con- 
troversy in  which  such  judgment  shall  have  been 
rendered.  (Sec.  302.) 

Securities  Defined 

The  term  "  Securities, "  as  used  in  this  Act,  includes 
stocks,  shares  of  stocks,  bonds,  debentures,  notes, 
certificates  of  indebtedness  and  other  obligations. 
(Sec.  303.) 

128] 


Repeal  Provisions 

The  right  to  amend,  alter  or  repeal  this  Act  is 
expressly  reserved  (Sec.  304),  and  all  pro- 
visions of  any  other  act  inconsistent  herewith 
are  repealed.  (Sec.  305.) 


War  Finance  Corporation  Act 

Approved  April  5, 1918 

AN  ACT 

To  provide  further  for  the  national  security  and 
defense,  and,  for  the  purpose  of  assisting  in  the  prosecu- 
tion of  the  war,  to  provide  credits  for  industries  and 
enterprises  in  the  United  States  necessary  or  contribu- 
tory to  the  prosecution  of  the  war,  and  to  supervise  the 
issuance  of  securities,  and  for  other  purposes. 

Be  it  enacted  by  the  Senate  and  House  of  Representa- 
tives of  the  United  States  of  America  in  Congress  assem- 
bled, 

Title  I.  — War  Finance  Corporation 

That  the  Secretary  of  the  Treasury  and  four  addi-  Organization 
tional  persons  (who  shall  be  the  directors  first  appointed  <^Corpora- 
as  hereinafter  provided),  are  hereby  created  a  body 
corporate  and  politic  in  deed  and  in  law  by  the  name, 
style,  and  title  of  the  "War  Finance  Corporation" 
(herein  called  the  Corporation),  and  shall  have  suc- 
cession for  a  period  of  ten  years :  Provided,  That  in  no 
event  shall  the  Corporation  exercise  any  of  the  powers 
conferred  by  this  Act,  except  such  as  are  incidental 
to  the  liquidation  of  its  assets  and  the  winding  up  of  its 
affairs,  after  six  months  after  the  termination  of  the 
war,  the  date  of  such  termination  to  be  fixed  by  procla- 
mation of  the  President  of  the  United  States. 

SEC.  2.  That  the  capital  stock  of  the  Corporation  Capital  Stock 

shall  be  $500,000,000,  all  of  which  shall  be  subscribed 

by  the  United  States  of  America,  and  such  subscription 

shall  be  subject  to  call  upon  the  vote  of  three-fifths  of 

[81] 


the  board  of  directors  of  the  Corporation,  with  the 
approval  of  the  Secretary  of  the  Treasury,  at  such  time 
or  times  as  may  be  deemed  advisable;  and  there  is 
hereby  appropriated,  out  of  any  money  in  the  Treasury 
not  otherwise  appropriated,  the  sum  of  $500,000,000, 
or  so  much  thereof  as  may  be  necessary  for  the  purpose 
of  making  payment  upon  such  subscription  when  and 
as  called.  Receipts  for  payments  by  the  United  States 
of  America  for  or  on  account  of  such  stock  shall  be 
issued  by  the  Corporation  to  the  Secretary  of  the 
Treasury,  and  shall  be  evidence  of  stock  ownership. 

Management  SEC.  3.  That  the  management  of  the  Corporation 
shall  be  vested  in  a  board  of  directors,  consisting  of  the 
Secretary  of  the  Treasury,  who  shall  be  chairman  of  the 
board,  and  four  other  persons,  to  be  appointed  by  the 
President  of  the  United  States,  by  and  with  the  advice 
and  consent  of  the  Senate.  No  director,  officer,  attor- 
ney, agent,  or  employee  of  the  Corporation  shall  in  any 
manner,  directly  or  indirectly,  participate  in  the 
determination  of  any  question  affecting  his  personal 
interests,  or  the  interests  of  any  corporation,  partner- 
ship, or  association,  in  which  he  is  directly  or  indirectly 
interested;  and  each  director  shall  devote  his  time,  not 
otherwise  required  by  the  business  of  the  United  States, 
principally  to  the  business  of  the  Corporation.  Before 
entering  upon  his  duties,  each  of  the  four  directors  so 
appointed,  and  each  officer,  shall  take  an  oath  faithfully 
to  discharge  the  duties  of  his  office.  Nothing  contained 
in  this  or  any  other  Act  shall  be  construed  to  prevent 
the  appointment  as  a  director  of  the  Corporation  of  any 
officer  or  employee  under  the  United  States  or  of  a 
director  of  a  Federal  reserve  bank. 


Board  of 
Directors 


Terms  of 
Office 


Of  the  four  directors  so  appointed,  the  President  of 
the  United  States  shall  designate  two  to  serve  for  two 
years,  and  two  for  four  years; and  thereafter  each  direc- 
[32] 


tor  so  appointed  shall  serve  for  four  years.  Whenever 
a  vacancy  shall  occur  among  the  directors  so  appointed, 
the  person  appointed  director  to  fill  any  such  vacancy 
shall  hold  office  for  the  unexpired  term  of  the  member 
whose  place  he  is  selected  to  fill.  Any  director  shall 
be  subject  to  removal  by  the  President  of  the  United 
States.  Three  members  of  the  board  of  directors  shall 
constitute  a  quorum  for  the  transaction  of  business. 

SEC.  4.  That  the  four  directors  of  the  Corporation 
appointed  as  hereinbefore  provided  shall  receive  annual 
salaries,  payable  monthly,  of  $12,000.  Any  director 
receiving  from  the  United  States  any  salary  or  com- 
pensation for  services  shall  not  receive  as  salary  from 
the  Corporation  any  amount  which,  together  with  any 
salary  or  compensation  received  from  the  United  States, 
would  make  the  total  amount  paid  to  him  by  the  United 
States  and  by  the  Corporation  exceed  $12,000. 

SEC.  5.  That  the  principal  office  of  the  Corporation 
shall  be  located  in  the  District  of  Columbia,  but  there 
may  be  established  agencies  or  branch  offices  in  any 
city  or  cities  of  the  United  States  under  rules  and  regu- 
lations prescribed  by  the  board  of  directors. 

SEC.  6.  That  the  Corporation  shall  be  empowered  and 
authorized  to  adopt,  alter,  and  use  a  corporate  seal;  to 
make  contracts;  to  purchase  or  lease  and  hold  or  dis- 
pose of  such  real  estate  as  may  be  necessary  for  the 
prosecution  of  its  business;  to  sue  and  be  sued;  to  com- 
plain and  defend  in  any  court  of  competent  jurisdiction, 
State  or  Federal;  to  appoint*  by  its  board  of  directors, 
and  fix  the  compensation  of  such  officers,  employees, 
attorneys,  and  agents  as  are  necessary  for  the  transac- 
tion of  the  business  of  the  Corporation,  to  define  their 
duties,  require  bonds  of  them  and  fix  the  penalties 
thereof,  and  to  dismiss  at  pleasure  such  officers,  em- 
ployees, attorneys,  and  agents;  and  to  prescribe,  amend, 
[33] 


Salaries  of 
Directors 


Office  of 
Corporation 


Administra- 
tive Powers 


Advances 
to  Banking 
Institutions 


Security  for 
Advances 


and  repeal,  by  its  board  of  directors,  subject  to  the 
approval  of  the  Secretary  of  the  Treasury,  by-laws 
regulating  the  manner  in  which  its  general  business  may 
be  conducted  and  the  privileges  granted  to  it  by  law 
may  be  exercised  and  enjoyed,  and  prescribing  the 
powers  and  duties  of  its  officers  and  agents. 

SEC.  7.  That  the  Corporation  shall  be  empowered 
and  authorized  to  make  advances,  upon  such  terms,  not 
inconsistent  herewith,  as  it  may  prescribe,  for  periods 
not  exceeding  five  years  from  the  respective  dates  of 
such  advances: 

(1)  To  any  bank,  banker,  or  trust  company,  in  the 
United  States,  which  shall  have  made  after  April  sixth, 
nineteen  hundred  and  seventeen,  and  which  shall  have 
outstanding,  any  loan  or  loans  to  any  person,  firm,  cor- 
poration,   or   association,    conducting   an   established 
and  going  business  in  the  United  States,  whose  opera- 
tions shall  be  necessary  or  contributory  to  the  prosecu- 
tion of  the  war,  and  evidenced  by  a  note  or  notes,  but 
no  such  advance  shall  exceed  seventy-five  per  centum 
of  the  face  value  of  such  loan  or  loans;  and 

(2)  To  any  bank,  banker,  or  trust  company,  in  the 
United   States,   which   shall   have   rendered   financial 
assistance,  directly  or  indirectly,  to  any  such  person/ 
firm,  corporation,  or  association  by  the  purchase  after 
April  sixth,  ninteen  hundred  and  seventeen,  of  its  bonds 
or  other  obligations,  but  no  such  advance  shall  exceed 
seventy-five  per  centum  of  the  value  of  such  bonds  or 
other  obligations  at  the  time  of  such  advance  as  esti- 
mated and  determined  by  the  board  of  directors  of  the 
Corporation. 

All  advances  shall  be  made  upon  the  promissory  note 
or  notes  of  such  bank,  banker,  or  trust  company, 
secured  by  the  notes,  bonds,  or  other  obligations,  which 
are  the  basis  of  any  such  advance  by  the  Corporation, 
together  with  all  the  securities,  if  any,  which  such 
[34] 


hank,  banker,  or  trust  company  may  hold  as  collateral 
for  such  notes,  bonds,  or  other  obligations. 

The  Corporation  shall,  however,  have  power  to  make  Additional 
advances  (a)  up  to  one  hundred  per  centum  of  the  face  Security  for 

value  of  any  such  loan  made  by  any  such  bank,  banker,   100%  Ad' 

i  /»  ..         vances 

or  trust  company  to  any  such  person,  nnn,  corporation, 

or  association,  and  (b)  up  to  one  hundred  per  centum 
of  the  value  at  the  time  of  any  such  advance  (as  esti- 
mated and  determined  by  the  board  of  directors  of  the 
Corporation)  of  such  bonds  or  other  obligations  by  the 
purchase  of  which  financial  assistance  shall  have  been 
rendered  to  such  person,  firm,  corporation,  or  associa- 
tion: Provided,  That  every  such  advance  shall  be 
secured  hi  the  manner  described  in  the  preceding  part 
of  this  section,  and  in  addition  thereto  by  collateral 
security,  to  be  furnished  by  the  bank,  banker,  or  trust 
company,  of  such  character  as  shall  be  prescribed  by 
the  board  of  directors,  of  a  value,  at  the  tune  of  such 
advance  (as  estimated  and  determined  by  the  board 
of  directors  of  the  Corporation) ,  equal  to  at  least  thirty 
three  per  centum  of  the  amount  advanced  by  the  Cor- 
poration. The  Corporation  shall  retain  power  to  re- 
quire additional  security  at  any  time. 

SEC.  8.  That  the  Corporation  shall  be  empowered  Advances 
and  authorized  to  make  advances  from  time  to  time,  to  Savings 
upon  such  terms,  not  inconsistent  herewith,  as  it  may  In8titution8 
prescribe,  for  periods  not  exceeding  one  year,  to  any 
savings  bank,  banking  institution  or  trust  company, 
in  the  United  States,  which  receives  savings  deposits, 
or  to  any  building  and  loan  association  in  the  United^ 
States,  on  the  promissory  note  or  notes  of  the  borrowing 
institution,  whenever  the  Corporation  shall  deem  such 
advances  to  be  necessary  or  contributory  to  the  prose- 
cution of  the  war  or  important  in  the  public  interest: 
Provided,  That  such  note  or  notes  shall  be  secured  by 
[35] 


the  pledge  of  securities  of  such  character  as  shall  be 
prescribed  by  the  board  of  directors  of  the  Corpora- 
tion, the  value  of  which,  at  the  time  of  such  advance 
(as  estimated  and  determined  by  the  board  of  directors 
of  the  Corporation)  shall  be  equal  in  amount  to  at  least 
one  hundred  and  thirty-three  per  centum  of  the  amount 
of  such  advance.  The  rate  of  interest  charged  on  any 
such  advance  shall  not  be  less  than  one  per  centum 
per  annum  in  excess  of  the  rate  of  discount  for  ninety- 
day  commercial  paper  prevailing  at  the  time  of  such 
advance  at  the  Federal  reserve  bank  of  the  district 
in  which  the  borrowing  institution  is  located,  but  such 
rate  of  interest  shall  in  no  case  be  greater  than  the 
average  rate  receivable  by  the  borrowing  institution 
on  its  loans  and  investments  made  during  the  six 
months  prior  to  the  date  of  the  advance,  except  that 
where  the  average  rate  so  receivable  by  the  borrowing 
institution  is  less  than  such  rate  of  discount  for  ninety- 
day  commercial  paper  the  rate  of  interest  on  such 
advance  shall  be  equal  to  such  rate  of  discount.  The 
Corporation  shall  retain  power  to  require  additional 
security  at  any  time. 

Direct  SEC.  9.  That  the  Corporation  shall  be  empowered 

Advances         and  authorized,  in  exceptional  cases,  to  make  advances 
to  Persons,      directly  to  any  person,  firm,  corporation,  or  association, 
Corporations   conducting  an  established  and  going  business  in  the 
United  States,  whose  operations  shall  be  necessary  or 
contributory  to  the  prosecution  of  the  war  (but  only  for 
the  purpose  of  conducting  such  business  in  the  United 
States  and  only  when  in  the  opinion  of  the  board  of 
directors  of  the  Corporation  such  person,  firm,  corpora- 
tion, or  association  is  unable  to  obtain  funds  upon 
reasonable  terms  through  banking  channels  or  from  the 
general  public),  for  periods  not  exceeding  five  years 
from  the  respective  dates  of  such  advances,  upon  such 
[36) 


terms,  and  subject  to  such  rules  and  regulations  as  may 
be  prescribed  by  the  board  of  directors  of  the  Corpora- 
tion. In  no  case,  shall  the  aggregate  amount  of  the 
advances  made  under  this  section  exceed  at  any  one 
time  an  amount  equal  to  twelve  and  one-half  per  cen- 
tum of  the  sum  of  (1)  the  authorized  capital  stock  of 
the  Corporation  plus  (2)  the  aggregate  amount  of 
bonds  of  the  Corporation  authorized  to  be  outstanding 
at  any  one  time  when  the  capital  stock  is  fully  paid 
in.  Every  such  advance  shall  be  secured  by  adequate 
security  of  such  character  as  shall  be  prescribed  by  the 
board  of  directors  of  a  value  at  the  time  of  such  advance 
(as  estimated  and  determined  by  the  board  of  directors), 
equal  to  (except  in  case  of  an  advance  made  to  a  rail- 
road in  the  possession  and  control  of  the  President, 
for  the  purpose  of  making  additions,  betterments  or 
road  extensions  to  such  railroad)  at  least  one  hundred 
and  twenty-five  per  centum  of  the  amount  advanced 
by  the  Corporation.  The  Corporation  shall  retain 
power  to  require  additional  security  at  any  time.  The 
rate  of  interest  charged  on  any  such  advance  shall  not 
be  less  than  one  per  centum  per  annum  in  excess  of  the 
rate  of  discount  for  ninety-day  commercial  paper  pre- 
vailing at  the  tune  of  such  advance  at  the  Federal 
reserve  bank  of  the  district  in  which  the  borrower  is 
located. 

SEC.  10.  That  in  no  case  shall  the  aggregate  amount  Limitation 
of  the  advances  made  under  this  title  to  any  one  person,   on  Advances 
firm,  corporation,  or  association  exceed  at  any  one  time 
an  amount  equal  to  ten  per  centum  of  the  authorized 
capital  stock  of  the  Corporation,  but  this  section  shall 
not  apply  in  the  case  of  an  advance  made  to  a  railroad 
in  the  possession  and  control  of  the  President,  for  the 
purpose   of   making   additions,    betterments   or   road 
extensions  to  such  railroad. 

[37] 


Power  to 
Deal  in 
Securities  of 
United  States 


SEC.  11.  That  the  Corporation  shall  be  empowered 
and  authorized  to  subscribe  for,  acquire,  and  own,  buy, 
sell,  and  deal  in  bonds  and  obligations  of  the  United 
States  issued  or  converted  after  September  twenty- 
fourth,  nineteen  hundred  and  seventeen,  to  such  extent 
as  the  board  of  directors,  with  the  approval  of  the  Sec- 
retary of  the  Treasury,  may  from  time  to  time  deter- 
mine. 

SEC.  12.  That  the  Corporation  shall  be  empowered 
and  authorized  to  issue  and  have  outstanding  at  any  one 
time  its  bonds  in  an  amount  aggregating  not  more  than 
six  times  its  paid-in  capital,  such  bonds  to  mature  not 
less  than  one  year  nor  more  than  five  years  from  the 
respective  dates  of  issue,  and  to  bear  such  rate  or  rates 
of  interest,  and  may  be  redeemable  before  maturity  at 
the  option  of  the  Corporation,  as  may  be  determined 
by  the  board  of  directors,  but  such  rate  or  rates  of 
interest  shall  be  subject  to  the  approval  of  the  Secre- 
tary of  the*Treasury.  Such  bonds  shall  have  a  first 
and  paramount  floating  charge  on  all  the  assets  of  the 
Corporation,  and  the  Corporation  shall  not  at  any  time 
mortgage  or  pledge  any  of  its  assets.  Such  bonds  may 
be  issued  at  not  less  than  par  in  payment  of  any  ad- 
vances authorized  by  this  title,  or  may  be  offered  for 
sale  publicly  or  to  any  individual,  firm,  corporation,  or 
association,  at  such  price  or  prices  as  the  board  of 
directors,  with  the  approval  of  the  Secretary  of  the 
Treasury,  may  determine. 

Upon  such  terms  not  inconsistent  herewith  as  may  be 
determined  from  time  to  time  by  the  board  of  directors, 
with  the  approval  of  the  Secretary  of  the  Treasury,  at 
or  before  the  issue  thereof,  any  of  such  bonds  may  be 
issued  payable  in  any  foreign  money  or  foreign  moneys, 
or  issued  payable  at  the  option  of  the  respective  holders 
thereof  either  in  dollars  or  in  any  foreign  money  or 
[38] 


foreign  moneys  at  such  fixed  rate  of  exchange  as  may 
be  stated  in  any  such  bonds.  For  the  purpose  of 
determining  the  amount  of  bonds  issued  payable  in 
any  foreign  money  or  foreign  moneys  the  dollar  equiva- 
lent shall  be  determined  by  the  par  of  exchange  at  the 
date  of  the  issue  thereof,  as  estimated  by  the  Director 
of  the  Mint  and  proclaimed  by  the  Secretary  of  the 
Treasury  in  pursuance  of  the  provisions  of  Section  25 
of  the  Act  entitled  "An  Act  to  reduce  taxation,  to  pro- 
vide revenue  for  the  Government,  and  for  other  pur- 
poses," approved  August  twenty-seventh,  eighteen 
hundred  and  ninety-four. 

SEC.  13.  That  the  Federal  reserve  banks  shall  be  Discount 
authorized,  subject  to  the  maturity  limitations  of  the  hy  Federal 
Federal  reserve  Act  and  to  regulations  of  the  Federal 
Reserve  Board,  to  discount  the  direct  obligations  of 
member  banks  secured  by  such  bonds  of  the  Corpora- 
tion and  to  rediscount  eligible  paper  secured  by  such 
bonds  and  indorsed  by  a  member  bank.  No  discount 
or  rediscount  under  this  section  shall  be  granted  at  a 
less  interest  charge  than  one  per  centum  per  annum 
above  the  prevailing  rates  for  eligible  commercial  paper 
of  corresponding  maturity. 

Any  Federal  reserve  bank  may,  with  the  approval 
of  the  Federal  Reserve  Board,  use  any  obligation  or 
paper  so  acquired  for  any  purpose  for  which  it  is  au- 
thorized to  use  obligations  or  paper  secured  by  bonds 
or  notes  of  the  United  States  not  bearing  jfhe  circula- 
tion  privilege:      Provided,    hoivever,    That    whenever  Issue  of 
Federal  reserve  notes  are  issued  against  the  security   Jj^JJ* 
of  such  obligations  or  paper  the  Federal  Reserve  Board   jyotes 
may  make  a  special  interest  charge  on  such  notes,  which, 
in  the  discretion  of  the  Federal  Reserve  Board,  need  not 
be  applicable  to  other  Federal  reserve  notes  which  may 
from  time  to  time  be  issued  and  outstanding.    All 
provisions  of  law,  not  inconsistent  herewith,  in  respect 
[39] 


President's 
Authoriza- 
tion to  Begin 
Business 


Earnings  of 
Corporation 


to  the  acquisition  by  any  Federal  reserve  bank  of  obliga- 
tions or  paper  secured  by  such  bonds  or  notes  of  the 
United  States,  and  in  respect  to  Federal  reserve  notes 
issued  against  the  security  of  such  obligations  or  paper, 
shall  extend,  in  so  far  as  applicable,  to  the  acquisition 
of  obligations  or  paper  secured  by  the  bonds  of  the 
Corporation  and  to  the  Federal  reserve  notes  issued 
against  the  security  of  such  obligations  or  paper. 

SEC.  14.  That  the  Corporation  shall  not  exercise 
any  of  the  powers  granted  by  this  title  or  perform  any 
business  except  such  as  is  incidental  and  necessarily 
preliminary  to  its  organization  until  it  has  been  author- 
ized by  the  President  of  the  United  States  to  commence 
business  under  the  provisions  of  this  title. 

SEC.  15.  That  all  net  earnings  of  the  Corporation  not 
required  for  its  operations  shall  be  accumulated  as  a 
reserve  fund  until  such  time  as  the  Corporation  liqui- 
dates under  the  terms  of  this  title.  Such  reserve  fund 
shall,  upon  the  direction  of  the  board  of  directors, 
with  the  approval  of  the  Secretary  of  the  Treasury, 
be  invested  hi  bonds  and  obligations  of  the  United 
States,  issued  or  converted  after  September  twenty- 
fourth,  nineteen  hundred  and  seventeen,  or  upon  like 
direction  and  approval  may  be  deposited  in  member 
banks  of  the  Federal  Reserve  System,  or  in  any  of  the 
Federal  reserve  banks,  or  be  used  from  time  to  time, 
as  well  as  any  other  funds  of  the  Corporation,  in  the 
purchase  or  redemption  of  any  bonds  issued  by  the 
Corporation.  The  Federal  reserve  banks  are  hereby 
authorized  to  act  as  depositaries  for  and  as  fiscal  agents 
of  the  Corporation  in  the  general  performance  of  the 
powers  conferred  by  this  title.  I/Beginning  six  months 
after  the  termination  of  the  war,  the  date  of  such 
termination  to  be  fixed  by  a  proclamation  of  the  Presi- 
dent of  the  United  States,  the  directors  of  the  Corpora- 
[40] 


tion  shall  proceed  to  liquidate  its  assets  and  to  wind 
up  its  affairs,  but  the  directors  of  the  Corporation,  in 
their  discretion,  may,  from  time  to  time,  prior  to  such 
date,  sell  and  dispose  of  any  securities  or  other  property 
acquired  by  the  Corporation.  Any  balance  remaining 
after  the  payment  of  all  its  debts  shall  be  paid  into  the 
Treasury  of  the  United  States  as  miscellaneous  receipts, 
and  thereupon  the  Corporation  shall  be  dissolved. 

SEC.  16.  That  any  and  all  bonds  issued  by  the  Corpo- 
ration shall  be  exempt,  both  as  to  principal  and  interest, 
from  all  taxation  now  or  hereafter  imposed  by  the 
United  States,  any  State,  or  any  of  the  possessions  of 
the  United  States,  or  by  any  local  taxing  authority,  Taxes  on 
except  (a)  estate  or  inheritance  taxes,  and  (b)  gradu-  Bonds 
ated  additional  income  taxes,  commonly  known  as 
surtaxes,  and  excess-profits  and  war-profits  taxes,  now 
or  hereafter  imposed  by  the  United  States,  upon  the 
income  or  profits  of  individuals,  partnerships,  corpo- 
rations, or  associations.  The  interest  on  an  amount 
of  such  bonds  the  principal  of  which  does  not  exceed 
in  the  aggregate  $5,000,  owned  by  any  individual, 
partnership,  corporation,  or  association,  shall  be  exempt 
from  the  taxes  referred  to  in  clause  (b).  The  Corpora- 
tion, including  its  franchise  and  the  capital  and  reserve 
or  surplus  thereof,  and  the  income  derived  therefrom, 
shall  be  exempt  from  all  taxation  now  or  hereafter  J,axcs  on. 
imposed  by  the  United  States,  any  State,  or  any  of 
the  possessions  of  the  United  States,  or  by  any  local 
taxing  authority,  except  that  any  real  property  of  the 
Corporation  shall  be  subject  to  State,  county,  or  muni- 
cipal taxes  to  the  same  extent,  according  to  its  value, 
as  other  real  property  is  taxed. 

SEC.  17.  That  the  United  States  shall  not  be  liable 
for  the  payment  of  any  bond  or  other  obligation  or   States 
[41] 


Penalties 


False 
Statement 


Over- 
Valuation 


Forgery  and 
Counterfeit- 
ing 


Embezzle- 
ment 


the  interest  thereon  issued  or  incurred  by  the  Corpora- 
tion, nor  shall  it  incur  any  liability  in  respect  of  any 
act  or  omission  of  the  Corporation. 

SEC.  18.  That  whoever  (1)  makes  any  statement, 
knowing  it  to  be  false,  for  the  purpose  of  obtaining 
for  himself  or  for  any  other  person,  firm,  corporation, 
or  association  any  advance  under  this  titlefshall  be 
punished  by  a  fine  of  not  more  than  $10,000,  or  by 
imprisonment  for  not  more  than  five  years,  or  both. 
Whoever  wilfully  overvalues  any  security  by  which 
any  such  advance  is  secured,  shall  be  punished  by  a 
fine  of  not  more  than  $5,000,  or  by  imprisonment  for 
not  more  than  two  years,  or  both. 

Whoever  (1)  falsely  makes,  forges,  or  counterfeits 
any  bond,  coupon,  or  paper  in  imitation  of  or  purport- 
ing to  be  in  imitation  of  a  bond  or  coupon  issued  by 
the  Corporation;  or  (2)  passes,  utters,  or  publishes,  or 
attempts  to  pass,  utter,  or  publish,  any  false,  forged, 
or  counterfeited  bond,  coupon,  or  paper  purporting 
to  be  issued  by  the  Corporation,  knowing  the  same  to 
be  falsely  made,  forged,  or  counterfeited;  or  (3)  falsely 
alters  any  such  bond,  coupon,  or  paper;  or  (4)  passes, 
utters,  or  publishes  as  true  any  falsely  altered  or  spuri- 
ous bond,  coupon,  or  paper  issued  or  purporting  to 
have  been  issued  by  the  Corporation,  knowing  the 
same  to  be  falsely  altered  or  spurious,  shall  be  punished 
by  a  fine  of  not  more  than  $10,000,  or  by  imprisonment 
for  not  more  than  five  years,  or  both. 

Whoever,  being  connected  in  any  capacity  with  the 
Corporation,  (1)  embezzles,  abstracts,  or  wilfully  mis- 
applies any  moneys,  funds,  or  credits  thereof,  or  (2)  with 
intent  to  defraud  the  Corporation  or  any  other  com- 
pany, body  politic,  or  corporate,  or  any  individual,  or 
to  deceive  any  officer  of  the  Corporation,  (a)  makes 
any  false  entry  in  any  book,  report,  or  statement  of 
[42] 


the  Corporation,  or  (b)  without  authority  from  the 
directors  draws  any  order  or  assigns  any  note,  bond, 
draft,  mortgage,  judgment,  or  decree  thereof,  shall  be 
punished  by  a  fine  of  not  more  than  $10,000,  or  by 
imprisonment  for  not  more  than  five  years,  or  both. 

The  Secretary  of  the  Treasury  is  hereby  authorized  Use  of 
to  direct  and  use  the  Secret  Service  Division  of  the  Secret 
Treasury  Department  to  detect,  arrest,  and  deliver  *" 
into  custody   of  the  United  States  Marshal  having 
jurisdiction  any  person  committing  any  of  the  offenses 
punishable  under  this  section. 

SEC.  19.  That  the  Corporation  shall  file  quarterly  Reports  of 
reports  with  the  Secretary  of  the  Senate  and  with  the  Corporation 
Clerk  of  the  House  of  Representatives,  stating  as  of  the 
first  day  of  each  month  of  the  quarter  just  ended  (1)  the 
total  amount  of  capital  paid  in,  (2)  the  total  amount 
of  bonds  issued,  (3)  the  total  amount  of  bonds  out- 
standing, (4)  the  total  amount  of  advances  made  under 
each  of  sections  7,  8,  and  9,  (5)  a  list  of  the  classes  and 
amount  of  securities  taken  under  each  of  such  sections, 
(6)  the  total  amount  of  advances  outstanding  under 
each  of  sections  seven,  eight,  and  nine,  and  (7)  such 
other  information  as  may  be  hereafter  required  by 
either  House  of  Congress. 

The  Corporation  shall  make  a  report  to  Congress  on 
the  first  day  of  each  regular  session,  including  a  detailed 
statement  of  receipts  and  expenditures. 

SEC.  20.  Section  fifty-two  hundred  and  two  of  the 
Revised  Statutes  of  the  United  States  is  hereby  amended 
so  as  to  read  as  follows:  "Sec.  5202.  No  national  bank-  Indebtedness 
ing  association  shall  at  any  time  be  indebted,  or  in  any   °f  National 
way  liable,  to  an  amount  exceeding  the  amount  of  its  Banks 
capital  stock  at  such  time  actually  paid  in  and  remain- 
ing undiminished  by  losses  or  otherwise,  except  on 
account  of  demands  of  the  nature  following: 
[43] 


Organization 

and 

Membership 


"First.    Notes  of  circulation. 

"Second.  Moneys  deposited  with  or  collected  by 
the  association. 

"Third.  Bills  of  exchange  or  drafts  drawn  against 
money  actually  on  deposit  to  the  credit  of  the  associa- 
tion, or  due  thereto. 

"Fourth.  Liabilities  to  the  stockholders  of  the  as- 
sociation for  dividends  and  reserve  profits. 

"Fifth.  Liabilities  incurred  under  the  provisions  of 
the  Federal  reserve  act. 

"Sixth.  Liabilities  incurred  under  the  provisions  of 
the  War  Finance  Corporation  Act." 

Title  II. — Capital  Issues  Committee 

SEC.  200.  That  there  is  hereby  created  a  committee 
to  be  known  as  the  "Capital  Issues  Committee,"  here- 
inafter called  the  Committee,  and  to  be  composed  of 
seven  members  to  be  appointed  by  the  President  of 
the  United  States,  by  and  with  the  advice  and  consent 
of  the  Senate.  At  least  three  of  the  members  shall 
be  members  of  the  Federal  Reserve  Board. 

No  member,  officer,  attorney,  agent,  or  employee  of 
the  Committee  shall  in  any  manner,  directly  or  in- 
directly, participate  in  the  determination  of  any  ques- 
tion affecting  his  personal  interests,  or  the  interest  of 
any  corporation,  partnership,  or  association  in  which 
he  is  directly  or  indirectly  interested.  Before  entering 
upon  his  duties,  each  member  and  officer  shall  take  an 
oath  faithfully  to  discharge  the  duties  of  his  office. 
Nothing  contained  in  this  or  any  other  Act  shall  be 
construed  to  prevent  the  appointment  as  a  member  of 
the  Committee,  of  any  officer  or  employee  under  the 
United  States  or  of  a  director  of  a  Federal  reserve  bank. 
[44] 


The  terms  during  which  the  several  members  of  the  Term  of 
Committee  shall  respectively  hold  office  shall  be  deter-  gjjj^^jf 
mined  by  the  President  of  the  United  States,  and  the  Members 
compensation  of  the  several  members  of  the  Com- 
mittee who  are  not  members  of  the  Federal  Reserve 
Board  shall  be  $7,500  per  annum,  payable  monthly, 
but  if  any  such  member  receives  any  other  compensa- 
tion from  any  office  or  employment  under  the  United 
States  the  amount  so  received  shall  be  deducted  from 
such  salary,  and  if  such  other  compensation  is  $7,500 
or  more,  such  member  shall  receive  no  salary  as  a 
member  of  the  Committee.  Any  member  shall  be 
subject  to  removal  by  the  President  of  the  United 
States.  The  President  shall  designate  one  of  the 
members  as  chairman,  but  any  subsequent  vacancy 
in  the  chairmanship  shall  be  filled  by  the  Committee. 
Four  members  of  the  Committee  shall  constitute  a 
quorum  for  the  transaction  of  business. 

SEC.  201.  That  the  Committee  may  employ  and  fix  Employees 
the  compensation  of  such  officers,  attorneys,  agents, 
and  other  employees  as  may  be  deemed  necessary  to 
conduct  its  business,  who  shall  be  appointed  without 
regard  to  the  provisions  of  the  Act  entitled  "An  Act 
to  regulate  and  improve  the  civil  service  of  the  United 
States,"  approved  January  sixteenth,  eighteen  hundred 
and  eighty-three  (volume  twenty- two,  United  States 
Statutes  at  Large,  page  four  hundred  and  three),  and 
amendments  thereto  or  any  rules  or  regulations  made 
in  pursuance  thereof.  No  such  officer,  attorney,  agent, 
or  employee  shall  receive  more  compensation  than  per- 
sons performing  services  of  like  or  similar  character 
under  the  Federal  Reserve  Board. 

SEC.  202.  That  all  the  expenses  of  the  Committee,    Expenses 
including  all  necessary  expenses  for  transportation  in- 
curred by  the  members  or  by  its  officers,  attorneys, 
[45] 


agents,  or  employees  under  its  orders  in  making  an 
investigation  or  upon  official  business  in  any  other 
places  than  at  their  respective  headquarters,  shall  be 
allowed  and  paid  on  the  presentation  of  itemized  vouch- 
ers therefor  approved  by  the  chairman. 

The  Committee  may  rent  suitable  offices  for  its  use, 
and  purchase  such  furniture,  equipment,  and  supplies 
as  may  be  necessary,  but  shall  not  expend  more  than 
$10,000  annually  for  offices  in  the  District  of  Columbia. 

The  principal  office  of  the  Committee  shall  be  in 
the  District  of  Columbia,  but  it  may  meet  and  exercise 
all  its  powers  at  any  other  place.  The  Committee 
may,  by  one  or  more  of  its  members,  or  by  such  agents 
as  it  may  designate,  prosecute  any  inquiry  necessary 
to  its  duties  in  any  part  of  the  United  States. 

SEC.  203.  That  the  Committee  may,  under  rules  and 
regulations  to  be  Prescribed  by  it  from  time  to  time, 
investigate,  pass  upon,  and  determine  whether  it  is 
compatible  with  the  national  interest  that  there  should 
be  sold  or  offered  for  sale  or  for  subscription  any  issue, 
or  any  part  of  any  issue,  of  securities  hereafter  issued 
by  any  person,  firm,  corporation,  or  association,  the 
total  or  aggregate  par  or  face  value  of  which  issue  and 
any  other  securities  issued  by  the  same  person,  firm, 
corporation,  or  association  since  the  passage  of  this 
Act  is  in  excess  of  $100,000.  Shares  of  stock  of  any 
corporation  or  association  without  nominal  or  par  value 
shall  for  the  purpose  of  this  section  be  deemed  to  be 
of  the  par  value  of  $100  each.  Any  securities  which 
upon  the  date  of  the  passage  of  this  Act  are  in  the 
possession  or  control  of  the  corporation,  association, 
or  obligor  issuing  the  same  shall  be  deemed  to  have 
been  issued  after  the  passage  of  this  Act  within  the 
meaning  hereof. 

[46] 


Nothing  in  this  title  shall  be  construed  to  authorize  Loans  Not  to 
such  Committee  to  pass  upon  (1)  any  borrowing  by  he  Passed 
any  person,  firm,  corporation,  or  association  in  the 
ordinary  course  of  business  as  distinguished  from 
borrowing  for  capital  purposes,  (2)  the  renewing  or 
refunding  of  indebtedness  existing  at  the  time  of  the 
passage  of  this  Act,  (3)  the  resale  of  any  securities  the 
sale  or  offering  of  which  the  Committee  has  determined 
to  be  compatible  with  the  national  interest,  (4)  any 
securities  issued  by  any  railroad  corporation  the  prop- 
erty of  which  may  be  in  the  possession  and  control  of 
the  President  of  the  United  States,  or  (5)  any  bonds 
issued  by  the  War  Finance  Corporation. 

Nothing  done  or  omitted  by  the  Committee  here-  No  Approval 
under  shall  be  construed  as  carrying  the  approval  of  ° 
the  Committee  or  of  the  United  States  of  the  legality, 
validity,  worth,  or  security  of  any  securities. 

SEC.  204.  That  there  is  hereby  appropriated  out  of  Appropri- 
any  money  in  the  Treasury  not  otherwise  appropriated,   ation 
for  the  remainder  of  the  fiscal  year  ending  June  thirtieth, 
nineteen  hundred  and  eighteen,  and  the  fiscal  year 
ending  June  thirtieth,  nineteen  hundred  and  nineteen, 
the  sum  of  $200,000  for  the  purpose  of  defraying  the 
expenses  of  the  establishment  and  maintenance  of  the 
Committee,  including  the  payment  of  the  salaries  and 
rents  herein  authorized. 

SEC.  205.  That  the  Committee  shall  make  a  report   Report  to 
to  Congress  on  the  first  day  of  each  regular  session,   Congress 
including  a  detailed  statement  of  receipts  and  expendi- 
tures, and  also  including  the  names  of  all  officers  and 
employees  and  the  salaries  paid  to  each. 

SEC.  206.  That  this  title  shall  continue  in  effect  until,   Duration  of 
but  not  after,  the  expiration  of  six  months  after  the   Committee 
termination  of  the  war,  the  date  of  such  termination 
to  be  determined  by  a  proclamation  of  the  President 

[47} 


of  the  United  States,  but  the  President  may  at  any 
time  by  proclamation  declare  that  this  title  is  no 
longer  necessary,  and  thereupon  it  shall  cease  to  be 
in  effect. 

Title  III. — Miscellaneous 

Penalty  gEC.  300.  That  whoever  wilfully  violates  any  of  the 

provisions  of  this  Act,  except  where  a  different  penalty 
is  provided  in  this  Act,  shall,  upon  conviction  in  any 
court  of  the  United  States  of  competent  jurisdiction, 
be  fined  not  more  than  $10,000  or  imprisoned  for  not 
more  than  one  year,  or  both;  and  whoever  knowingly 
participates  in  any  such  violation,  except  where  a 
different  penalty  is  provided  in  this  Act,  shall  be 
punished  by  a  like  fine  or  imprisonment,  or  both. 

Stamp  Taxes  SEC.  301.  That  no  stamp  tax  shall  be  required  or 
imposed  upon  a  promissory  note  secured  by  the  pledge 
of  bonds  or  obligations  of  the  United  States  issued  after 
April  twenty-fourth,  nineteen  hundred  and  seventeen, 
or  secured  by  the  pledge  of  a  promissory  note  which 
itself  is  secured  by  the  pledge  of  such  bonds  or  obliga- 
tions: Provided,  That  in  either  case  the  par  value  of 
such  bonds  or  obligations  shall  equal  the  amount  of 
such  note. 


Provisions 

Deemed 

Separable 


SEC.  302.  That  if  any  clause,  sentence,  paragraph, 
or  part  of  this  Act  shall,  for  any  reason,  be  adjudged 
by  any  court  of  competent  jurisdiction  to  be  invalid, 
or,  in  case  any  court  of  competent  jurisdiction  shall 
adjudge  to  be  invalid  any  provisions  hereof  in  respect 
of  any  class  or  classes  of  securities,  such  judgment 
shall  not  affect,  impair,  or  invalidate  the  remainder  of 
this  Act,  but  shall  be  confined  in  its  operation  to  the 
clause,  sentence,  paragraph,  part,  or  subject  matter  of 
this  Act  directly  involved  in  the  controversy  in  which 
judgment  shall  have  been  rendered. 
[48] 


SEC.  303.  That  the  term  "securities,"  as  used  in  this  Securities 

Act,  includes  stocks,  shares  of  stock,  bonds,  debentures,  Defined 
notes,  certificates  of  indebtedness,  and  other  obligations. 

SEC.  304.  That  the  right  to  amend,  alter,  or  repeal  Right  to 

this  Act  is  hereby  expressly  reserved.  Appeal 

SEC.  305.  That  the  short  title  of  this  Act  shall  be  Short  Title 
the  "War  Finance  Corporation  Act." 

SEC.  306.  That  all  provisions  of  any  Act  or  Acts  in-  Other  Acts 

consistent  with  the  provisions  of  this  Act  are  hereby  Repealed 
repealed. 


[49] 


Index  to  Synopsis 


ADVANCES 

Additional  Security  may  be 
Required  on,  12,  13,  14 

Allowable  only  for  Conduct- 
ing Business  in  the  United 
States,  13 

Directly  to  War  Industries,  13 

For  Period  not  Exceeding 
Five  Years,  10,  14 

For  Period  not  Exceeding  One 
Year,  12 

Interest  on,  13,  14 

Limitations  on  Amount  of 
Advances,  11,  14,  15 

Limitations  on  Amount  of 
Direct  Advances,  14 

Must  be  Adequately  Secured, 
12,  14 

Security,  11,  12,  14 

To  Banks  Lending  Money  to 
War  Industries,  10 

To  Banks  Rendering  Finan- 
cial Assistance  to  War  In- 
dustries, 10 

To  Railroads  under  Control 
of  United  States,  14,  15 

To  Savings  Institutions,  12 

Up  to  100%  of  Face  Value 
of  Loan  by  a  Bank,  11 

Up  to  100%  of  Value  of  Ob- 
ligations Purchased  by 
which  Financial  Help  was 
Given,  11,  12 

APPROVAL  OF  UNITED  STATES  OF 
LEGALITY  OF  SECURITIES, 
24 

BONDS 

Determining  Amount  Issued 

Payable  in  Foreign  Money, 

16 

Floating  Charge,  15 
Interest  Rate,  15 

[51 


Issuance  by  the  Corporation, 
15 

Issued  Payable  in  Foreign 
Money,  16 

Sale  of,  16 
CAPITAL  ISSUES  COMMITTEE 

Chairman,  23 

Employees  of,  25 

Expenses  of,  26 

Limitations  on  Powers  of 
Members,  23 

Members,  23 

Office,  26 

Persons  Eligible  for  Appoint- 
ment, 23 

Powers,  24 

Quorum,  23 

Salaries  of  Members,  23 

Termination  of  Duties  of,  27 

Terms  of  Office  of  Members, 
23 

CAPITAL  STOCK 

Amount  Subscribed,  9 
Receipts  for  Stock  Issued,  9 

DIRECTORS  OF  THE  CORPORA- 
TION 

Appointment,  8 

Chairman  of  Board,  8 

Compensation  of,  9 

Limitation  on  Activities,  8 

Oath,  8 

Persons  Eligible  for  Appoint- 
ment, 8 

Quorum,  8 

Removal  of,  8 

Terms  of  Office,  8 

Vacancies,  8 

DISCOUNT  BY  FEDERAL  RE- 
SERVE BANKS,  17 

DISSOLUTION  OF  THE  CORPORA- 
TION, 19 


FEDERAL  RESERVE  BANKS 
Depositaries      and      Fiscal 
Agents  of  the  Corporation, 
18 
Discount    of   Obligations    of 

Member  Banks,  17 
Provisions  as  to  Obligations 

Acquired  by,  18 
FEDERAL  RESERVE  NOTES 
Interest  Charge  on,  17 
Security  for,  17 

FISCAL  AGENT  OF  THE  CORPOR- 
ATION 

Federal  Reserve  Banks  as,  18 
FUNDS 
Deposited  in  Banks  of  Federal 

Reserve  System,  18 
Investment  of,  18 
Purchase  and  Redemption  of 

Bonds,  18 
Reserve,  18 
INDEBTEDNESS  OF  NATIONAL 

BANKS,  22 

LIABILITY  OF  UNITED  STATES  AS 
TO    OBLIGATIONS    OF    THE 
CORPORATION,  16 
NATIONAL  BANK  INDEBTED- 
NESS, 22 

ORGANIZATIONS   OF  WAR    FIN- 
ANCE CORPORATIONS 
Directors,  7 
Duration,  7 
Exercise  of  Powers,  7 
Offices,   7 
PAR    VALUE    OF    SHARES    OF 

STOCK, 24 
PENALTIES 

Embezzlement.  21 
False  statements,  20 
Forgery  and  Counterfeiting, 
20 


In  General,  28 
Over- valuation,  20 

POWERS    OF    CAPITAL     ISSUES 

COMMITTEE.  24 
Limitations  on,  25 

POWERS  OF  CORPORATION 
Administrative,  9,  10 
Limitations  on,  7,  15 
To    Deal    in    United    States 

Bonds,  10 
To  Issue  Bonds,  15 
To  Issue  Bonds  Payable  in 

Foreign  Money,  16 
To  Make  Advances  to  Banks, 

10,  11 
To  Make  Advances  to  Savings 

Institutions,  12 
To  Make  Direct  Advances  to 

War  Industries,  13 

PRESUMPTION  AS  TO  TIME  OF 
ISSUE  OF  SECURITIES,  24 

PROVISIONS  DEEMED  SEPA- 
RABLE, 28 

REPEAL  PROVISIONS,  29 

REPORTS  TO  CONGRESS  OF 
Committee,  27 
Corporation,  21,  22  .. 

SECURITIES|DBFINED,  29 
STAMP  TAXES,  28 

TAXES 

Bonds  of  the  Corporation,    19 
Franchises,  Capital  and  Re- 
serve Funds,  19 
Real  Property,  19 

UNITED  STATES  NOT  LIABLE  ON 
BONDS  OF  THE  CORPORA- 
TION, 16 

VIOLATIONS  OF  THE  ACT,  DE- 
TECTION OF,  21 


[52] 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
J   *     STAMPED  BELOW 


AN     INITIAL     FINE     OF     25     CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.OO  ON  THE  SEVENTH  DAY 
OVERDUE. 


r 


JSOV  9  1932 


12 


LD  21-50m-8,'32 


